Archive for May, 2013

The Government has announced that it will remove the 50% CGT discount for foreign residents on capital gains accrued after 7.30pm (AEST) on 8 May 2012. However, the CGT discount will remain available for capital gains that accrued prior to this time where foreign residents choose to obtain a market valuation of assets as at 8 May 2012. This means that, unless a market valuation is obtained of relevant assets as at 8 May 2012, the CGT discount will not be available at all for foreign residents.

For 2012–2013 and later income years, the dependent spouse tax offset will only be available to those born on or before 1 July 1952. However, the provisions contain exceptions for dependent spouses who are unable to work due to invalidity or carer obligations, and for taxpayers who are eligible for the zone, overseas forces or overseas civilian tax offsets.

Under the small business entity regime, a taxpayer does not need to elect to enter into the regime. Instead, it will be apparent from a small business entity’s tax return whether it has used the tax concessions.

Concessions available
The tax concessions available to small business entities (subject to any additional criteria set out in the particular concessions themselves) include:

capital allowance concessions – an immediate deduction for depreciating assets costing less than $6,500, and one general small business depreciation pool from the 2012–2013 year;

an instant tax write-off for the first $5,000 of the cost of eligible motor vehicles purchased in the 2012–2013 or later income years;

simpler trading stock rules – being allowed to ignore the difference between the opening and closing value of trading stock (up to $5,000);

The Government has recently made a number of important announcements affecting superannuation. A key proposal announced is that the Government will change the superannuation law to cap tax-free earnings at $100,000. That is, the tax exemption for earnings on superannuation fund assets supporting income streams will be capped at $100,000 per annum per person from 1 July 2014. A tax rate of 15% will apply to fund earnings above $100,000. According to the Government, the measure would affect around 16,000 individuals who have around $2 million in their superannuation funds and an estimated rate of return of 5%.

However, the Government confirmed that withdrawals will continue to remain tax-free for those aged 60 years and over. Presumably, the proposals will be subject to public consultation before implementation.

The Australian Securities and Investments Commission (ASIC) has warned people to be aware of property spruikers who might be encouraging them to set up a self managed superannuation fund (SMSF) in order to gear into real property.

The warning comes with the release of ASIC’s review of financial advice provided in the SMSF sector. According to ASIC, the majority of advice reviewed was adequate. However, it noted a number of areas requiring improvement, including the need to better inform investors of the risks associated with investments.

TIP: Investors should take care when considering advertisements pushing property purchases through SMSFs. A number of key considerations, such as legal obligations, risks and alternatives, should be taken into account before making a decision to invest in property via an SMSF.

The Administrative Appeals Tribunal (AAT) has recently dismissed an appeal by a florist against the Tax Commissioner’s decision to issue income tax and GST assessments following an ATO audit of her florist business.

The taxpayer had reported that the cost of goods sold in her business represented 83% of her reported business income. The ATO had selected the taxpayer for audit because this figure was outside what it considered to be the industry benchmark range of between 44% and 54%.

In this case, the taxpayer was unable, due to a lack of evidence, to prove to the AAT that the assessments were excessive.

TIP: The Tax Commissioner has warned that businesses operating outside the relevant benchmarks could be subject to ATO review and/or audit, and where the businesses do not have adequate records to substantiate their performance, the ATO will make a default assessment using the appropriate small business benchmark.

Businesses may want to consider reviewing their record-keeping practices and assess whether they are at risk of an audit. Please contact MDB for further information.

The ATO has released a Ruling setting out the minimum information requirements for a tax invoice under the GST law. The Ruling also explains the circumstances in which it is not necessary for the supplier to give a tax invoice, and the circumstances in which an input tax credit is attributable to a tax period without the recipient being required to hold a tax invoice for a creditable acquisition.

However, the Ruling states that the recipient must have records to explain its entitlement to an input tax credit for a creditable acquisition.

TIP: In certain situations, it may be difficult to ascertain whether a document is a “tax invoice” that complies with the requirements of the GST law. For example, a “quote” given by a professional or tradesperson to a single recipient would generally not qualify as a “tax invoice”.

However, the Tax Commissioner has made a determination to waive the tax invoice requirement to cover particular situations such as “offer documents and renewal offers”. Please contact our office for further information.

The ATO has recently announced the following new data-matching programs:

Employers and WorkCover – the ATO will request and collect names and addresses of employers from state and territory WorkCover sources for the 2011 to 2013 financial years. It says the data will be matched to identify employers who might not be complying with their registration, lodgment and payment obligations under tax law.

Student and temporary work visa holders – the ATO will collect details of student and temporary work visa holders between the period 1 January 2012 to 30 June 2014 from the Department of Immigration and Citizenship for the 2012, 2013 and 2014 income years. The information will be matched to identify non-compliance with tax obligations.

Online sellers – the ATO will collect information of sellers who have made sales of $20,000 or more in the 2010–2011 income year through various online selling websites. It says records will be matched to identify non-compliance with lodgment, payment and correct reporting obligations under tax law, including undeclared income and goods and services tax (GST) obligations.

The Government has announced that it will introduce a $2,000 per-person cap on tax deduction claims for work-related self-education expenses. The cap is proposed to apply from 1 July 2014.

In making the announcement, Treasurer Swan said that without a cap, “it’s possible to make large claims for expenses such as first class airfares, 5-star accommodation and expensive courses”. However, the Treasurer said the Government “will consult with employees and employers to better target this concession while still supporting essential training”

On 14 May 2013, the Treasurer handed down the 2013-14 Federal Budget. Significant revenue shorifalls over those budgeted for and Government spending commitments such as the Gonski school reforms, placed considerable pressure on the Budget. The Treasurer announced a deficit of $1 8bn in 2013-14. The Government said it expects the deficit to fall to $10.9bn in 2014-15 and return to a small surplus ($800m) by 2015-16.

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The ATO has released further guidance on when SMSFs need to report events affecting their members’ transfer balance accounts (by making a transfer balance account report, or TBAR) for the purposes of the $1.6 million pension cap. From 1 July 2018, SMSFs that have any members with a total superannuation balance of $1 million or [...]